is surge pricing in restaurant industry a game changer?

Sometimes it’s busy, sometimes it’s slow. Such is the nature of running nearly any kind of business. Off-season lulls seem to drag on forever, and bad weather causes customers to change their plans and spend their dollars elsewhere.

Simply offering a coupon, sale, matinee price or happy hour doesn’t always cut it. Even dynamic, demand-based pricing (think: fluctuating hotel and flight prices or Uber surge pricing), which has been around for years, doesn’t always solve the challenge many companies face luring customers amid the doldrums.

Business owners are constantly looking for innovative solutions to excite customers, such as gamification. Promotional games have clear actions and rewards for users, contain elements of chance and mystery or could even feature a social component.

Game design varies based on industry and depends on the target customer and desired behavior. In experimenting with gamification, some are seeing some great results, including Scott Parker.

In the past five years, Parker has opened four bar-restaurant hybrids in Arlington and Alexandria, Va.: A-Town Bar & Grill, Don Tito, Don Taco and Barley Mac. They’re destinations for the after-work drinking crowd, as well as places for friends to catch up or watch a big game. Parker says he’d been looking for a way to not only fill seats during off-peak hours, but also put his businesses on the map as places to have a bite in addition to an adult beverage.

He’d partnered with a couple of discount app startups in the early years, but he didn’t see big returns. Nascent companies would often approach him with a pitch for his restaurants to be among their first test users, which was a difficult sell.

“There are so many apps out there that are trying to launch in restaurants and bars. You really become almost numb to them, because so many people are hitting us up,” Parker says, adding, “And any time you do anything with discounts, it needs to be carefully thought out and understood how it affects all parts of the restaurant, from the service staff needing to know how it works and applying it, to what a reasonable expectation is in how it should perform and, obviously, how it impacts the bottom line.”

That’s why, when Spotluck, a dining discount app that combines dynamic pricing with gamification by spinning a wheel, came knocking two years ago, Parker was skeptical. By that point, however, Spotluck had been around for more than a year and had already gained some traction in the Washington, D.C., area. He decided to give it a spin.

dynamic pricing

Spotluck sets itself apart from other discount startups because it employs dynamic pricing. Its premise is that eating at a restaurant on a sunny Friday evening shouldn’t cost the same as eating there on a rainy Tuesday at 2 p.m. when foot traffic is low to nonexistent. Its software offers discounts that fluctuate based on day, time, weather and restaurant occupancy.

“It’s almost like a of restaurants,” Parker says. “People can really bargain shop and they can feel like they’re getting a good deal, it works well for the business and everyone’s happy.”

Users download the free app and have the opportunity to spin a virtual wheel once a day. The wheel lands on a local restaurant and offers a discount up to 35 percent off. Landing on a discount doesn’t guarantee a diner a reservation at that establishment, but to avoid overcrowding, Spotluck is programmed not to drive too many users to one place at one time. Discounts are available on an on-demand basis and cannot be saved -- they have to be used during that same day before conditions change. Diners also can’t get the maximum discount at a restaurant if they’ve claimed it in the past, but they can get lower discounts for their subsequent visits.

Merchants that use Spotluck are also able to track basic data about users, including gender, age and zip code. If users land on a discount they don’t want to use, they can opt for 10 percent off at another participating restaurant nearby, and the app notifies restaurants when users do this so they can reflect upon why a competitor might have been more enticing.

There’s a one-time nominal sign-up fee of $150 to $300 for each restaurant, and every time the platform inspires a user to dine there, the restaurant pays Spotluck just $1. Getting people to stampede through the doors of participating restaurants is not the goal. The restaurants and Spotluck are playing the long game.

positive results

Parker says that in the last two years since he first implemented Spotluck at his restaurants, he has seen nearly 2,500 Spotluck users come through.

“For us, those are real numbers,” Parker says. “That’s not like one or two people used the app and then came in. “That’s not only a great way to generate revenue, but a great way to get a bunch of fresh faces in the restaurant that might hopefully come back as a customer another time.”

Spotluck also lets him see how many repeat customers Spotluck inspires. Across all four of Parker’s restaurants, 19 percent of those lured by Spotluck have returned for at least one subsequent visit.

He also says he appreciates the demographic data. Across his four restaurants, Spotluck has attracted diners from 125 different zip codes. “We see that people are coming from all over and we’re not just getting local people. We also want to get more in touch with people locally, so by breaking down those numbers, we change up our marketing strategy based on that.”

To Parker, though, this is just part of the value Spotluck provides.

“The best part for us by far has been the user feedback. It’s almost like we’re getting an internal Yelp page where we can get great feedback from our guests that’s not public, whereas so many review sites are,” Parker says, noting that most of the useful comments been related to employee performance.

gamification strategy

While gamification can be successful, business owners need to execute the strategy correctly.

Games in and of themselves aren’t fixes, explains Yu-kai Chou, an author and international keynote speaker on gamification and behavioral design. Not all games are fun and engaging, he warns. Some are downright boring.

“Only a few really well-designed games that appeal to psychology are successful,” Chou says. “You have to understand how everything flows together to create a cohesive, fun experience. Designing with empathy is very important.”

You have to think about the user, customer or even employee you’re designing for and what kind of motivation you’re trying to inspire in them, Chou says. Nail down that goal first.

The next step is to make people take the desired action by appealing to their intrinsic motivation (e.g. internal satisfaction, wanting to learn, happiness). People are intrinsically motivated when they feel like they have meaningful choices, when they can attain social influence and when something is unpredictable or piques their curiosity, Chou says.

After you make your gamified solution engaging through these methods, only then should you try to appeal to extrinsic motivation -- such as savings or praise -- with elements such as a progress bar, notifications about milestones, points, badges, rewards or other types of extra power.

Spotluck users can also accumulate points when they dine, review and share their experience on social media. If they get 250 points in a 60-day period, they earn Spotlucker Gold status, earning three spins a day, access to Spotluck events and more.

“Most companies do it the other way around. They start off with a boring task and they say, ‘If you do this boring task 1,000 times, you get a badge or a reward,’” Chou says. “That design can temporarily bridge certain activities, but it is not sustainable. And in fact, extrinsic motivation is shown to kill intrinsic motivation.”


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